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Shifting Sands Favoring Dow Chemical

Dow could benefit from big changes in Middle East refinery and petrochem projects.

In the past week, a pair of U.S. companies, Dow Chemical(NYSE:DOW) and Fluor(NYSE:FLR), have rediscovered that the shifting sands of the Middle East can yield surprises, sometime pleasant and other times not-so-uplifting ones.

During the week, for instance, Arabian oil company Saudi Aramco confirmed that it will proceed with an array of its major long-term plans, some of which had been assumed to be in jeopardy. For one thing, a nearly $27 billion undertaking with Dow has been reaffirmed by the folks in Riyadh. The giant project will involve the construction of a petrochemical project on the Persian Gulf. While Dow has maintained all along that the plans remained solid, bouncing crude prices and economic softness made for skepticism in various quarters.

Indeed, not all situations turn out well in this mysterious part of the world. You may recall that Dow was abandoned not long ago by the Saudi's Kuwaiti neighbors, who pulled out of a $17.4 billion joint venture that was to be named K-Dow Petrochemical. The facilities that Dow would have contributed could have gone a long way toward paying for Dow's still pending purchase of Rohm & Haas(NYSE:ROH).

And among the shifting sands, another adventure involving the Kuwait National Petroleum Company erupted at the tail end of last week. At issue was the strong rumor that U.S. engineering firm Fluor had been sent packing following the apparent cancellation of a refinery being built there. Fluor's shares took a hit on the day. But as it turns out, the project has not been scrapped entirely, but the tender has been withdrawn, and the refinery will undergo further review by the Supreme Petroleum Council.

Finally, there's a still up-in-the-air possibility that a Saudi refinery will be constructed by an Aramco-ConocoPhillips(NYSE:COP)partnership. However, a decision on the project -- which was originally set aside on the scheduled bidding day in November -- now won't occur until 2010.

For now, at least, the key beneficiary of all this action appears to be Dow Chemical. Sure, the company is leveraging up to buy Rohm and Haas instead of potentially selling off assets to companies like Syngenta(NYSE:SYT) or DuPont(NYSE:DD), but its Saudi project is big enough to at least make it worthy of frequent Foolish attention.